Bitcoin crashes, losing nearly half of its value in six hours

Plunge happens on the same day one anonymous redditor made it rain in Bitcoin.

On Wednesday afternoon, the Bitcoin bubble appears to have burst. As of this writing, its current value is around $160—down from a high of $260. (It fell as low as $130 today.) There is no obvious explanation for why the digital currency has fallen so far and so fast, although the market correcting after such a huge rise might be a good explanation. (Update 4:05pm CT: Bitcoin seems to have somewhat recovered and appears to be hovering around $200. Update 6:00pm CT: The exchange rate has fallen back to around $160.)

Some redditors have taken solace in a comment thread entitled "Hold Spartans."

"This is just the market venting some pressure after these huge gains," wrote anotherblog. "To be honest I'm glad it's happening now. If it recovers, it will demonstrate resilience in the market and give confidence to future buyers and current holders that they don't need to panic sell, reduce the chances of a crash in the future."

Coincidentally, the plunge came several hours after a reddit user by the name of “Bitcoinbillionaire” suddenly, spontaneously decided to give away around $12,000 (more than 63 BTC) worth of the digital currency. Bitcoinbillionaire rewarded 13 seemingly random redditors, then stopped the whirlwind spree after about eight hours. At the moment, no evidence links the currency's plunge with this random reddit charity.

Bitcoinbillionaire took advantage of reddit’s Bitcointip mechanism, which allows users to send each other small amounts of cash (usually less than $5). The mysterious benefactor appears to have given away 20 BTC (now worth slightly less than $4,000) as his or her first gift to one Karelb. This gift happened under a comment titled: “I wish for the price to crash.” That comment now seems prophetic.

A look at the account transferring all this money shows that two hours before the giveaways began, Bitcoinbillionaire received 50 BTC (about $9,500) from another account without an IP address.

Business Insiderreported that Bitcoinbillionaire has left hints that he or she was an "early adopter," and had forgotten he or she even had any bitcoins. Not much is known beyond that, as Bitcoinbillionaire vanished as suddenly as he or she appeared.

Promoted Comments

Though it wasn't the original intent, BTC is now a commodity. People don't spend; they hoard, hoping to cash in. Well, it looks like they cashed in.

BTC was all about secure transactions. The value was in the anonymity, security (relatively speaking; if you get hacked...) and of course, the impossibility of a chargeback. That's it. Any other value people add to it is just an investment.

I have a feeling "Bitcoinbillionaire" was aware of this and decided to show everyone that the value of BTC is in the nature of the currency. Not the currency itself.

Or, if you're the conspiracy type, then Bitcoinbillionaire was working for The Man trying to devalue the currency to the outside world. Either way, I don't see what the problem was as it was never meant to have value outside of its ecosystem.

Though it wasn't the original intent, BTC is now a commodity. People don't spend; they hoard, hoping to cash in. Well, it looks like they cashed in.

BTC was all about secure transactions. The value was in the anonymity, security (relatively speaking; if you get hacked...) and of course, the impossibility of a chargeback. That's it. Any other value people add to it is just an investment.

I have a feeling "Bitcoinbillionaire" was aware of this and decided to show everyone that the value of BTC is in the nature of the currency. Not the currency itself.

Or, if you're the conspiracy type, then Bitcoinbillionaire was working for The Man trying to devalue the currency to the outside world. Either way, I don't see what the problem was as it was never meant to have value outside of its ecosystem.

Surprising nobody. What a mess.This whole thing reeks to high heaven and I hope some government organization investigates.

Edit: Really puzzled over the downvotes here. This was a bubble from the get-go, and this crash is a natural result. The Feds want money laundering rules to apply to bitcoin. This market needs some oversight.

BTC was all about secure transactions. The value was in the anonymity, security (relatively speaking; if you get hacked...) and of course, the impossibility of a chargeback. That's it.

The flaw being, if someone somewhere wasn't siting on coins then you couldn't trade your regular currency in for them (to make a purchase) unless you caught someone else just as he exited his own transaction (and wanted his own native currency back). Without a super high transaction rate in the BTC market there pretty much has to be someone speculating on coins somewhere acting as a buffer.

Though it wasn't the original intent, BTC is now a commodity. People don't spend; they hoard, hoping to cash in.

There are currently an average of 300,000 bitcoins transacted every day. For a currency that has 20 million coins total, that is not bad at all. That means every ~two months the entire worth of bitcoin is involved in a transaction. That is not what I would call hoarding.

Though it wasn't the original intent, BTC is now a commodity. People don't spend; they hoard, hoping to cash in. Well, it looks like they cashed in.

You forget that bitcoins only have any monetary value at all because of the merchants who accept them as currency. If said merchants didn't exist, bitcoins would be absolutely worthless pieces of digital cryptography.

Though it wasn't the original intent, BTC is now a commodity. People don't spend; they hoard, hoping to cash in.

There are currently an average of 300,000 bitcoins transacted every day. For a currency that has 20 million coins total, that is not bad at all. That means every ~two months the entire worth of bitcoin is involved in a transaction. That is not what I would call hoarding.

The ironic part is that, with all the cash hoarding going on today in the real world (as evidenced by the raging success of Wall Street with no trickle down to the rest of society), eksith's statement probably applies more to 'real' currency than with BitCoin, ATM.

BTC was all about secure transactions. The value was in the anonymity, security (relatively speaking; if you get hacked...) and of course, the impossibility of a chargeback....I

How can this be promoted when it is so wrong! There is no anonymity in Bitcoin. There is only a large cost/time delay in discovering who someone is, but every transaction is public. It is only a matter of time before node in the network start leaking user's names.

Much like people are like "Oh crap" about old drunken facebook posts, the breadth of information available int he future will embarrass those currently int he network.

Was gonna say even this 'burst bubble' and 'market correction' are involving numbers far higher than I remember. Then again last time i really read the bitcoin articles on here I think it was in the $7 range and mainly an interesting novelty.

Though it wasn't the original intent, BTC is now a commodity. People don't spend; they hoard, hoping to cash in.

There are currently an average of 300,000 bitcoins transacted every day. For a currency that has 20 million coins total, that is not bad at all. That means every ~two months the entire worth of bitcoin is involved in a transaction. That is not what I would call hoarding.

The ironic part is that, with all the cash hoarding going on today in the real world (as evidenced by the raging success of Wall Street with no trickle down to the rest of society), eksith's statement probably applies more to 'real' currency than with BitCoin, ATM.

Given that BitCoin is inherently deflationary, early adopters, if they can weather these flash crashes, will be immensely positioned save for one outcome: government intervention.

Basically, Chris Koss's entire life savings is now locked up in a cyber currency that's barely four years old. Ken Kuttner, an economic professor at Williams College, says this kind of behavior has all the hallmarks of a bubble.

I've always stood by my personal belief that there is nothing in the world that has actual value other than human labor.

Since so-called "intellectual property" is included in that description, I like it but it still falls short as it relates to scarce resources.

The only thing that I can think of that is provided without human labor are air, water, and natural foods. Everything else involves some sort of human effort to produce. A dairy farmer doesn't buy beef from the grocery store, someone who grows corn doesn't buy popcorn from Orville Redenbacher, and those that live near natural water sources don't need to buy water from an outside source (Jack Daniels distillery for example). Yes, it doesn't involve everything naturally, but anything that isn't crucial to basic human needs to live involves human labor and without it nothing is produced. It seems oversimplified, but if you break down what you use everyday or what it takes for you to stay alive, human labor is involved in all of it. Even if you hunt game you don't get nice deer sausage without a little human labor to make it happen. Everything boils down to it on the most basic level.

Though it wasn't the original intent, BTC is now a commodity. People don't spend; they hoard, hoping to cash in.

There are currently an average of 300,000 bitcoins transacted every day. For a currency that has 20 million coins total, that is not bad at all. That means every ~two months the entire worth of bitcoin is involved in a transaction. That is not what I would call hoarding.

I don't see how that proves anything. Could be 600,000 bitcoins get traded every 2 days, and the rest just sits there.

I've always stood by my personal belief that there is nothing in the world that has actual value other than human labor.

So tools that make human labor more efficient don't have value to you?

I can appreciate the sentiment, but in reality I value a pair of border collies more than the labor of 3-4 men when it comes to herding cattle. I value a truck more than the labor of 20 men when it comes to hauling things around.

Until the cash in my hand can't get me the things I need, I'll value it too.

I sold my 1.1BTC about 4 hours ago. Prices have nearly halved since. Mining continues for now, depending on future prices - it costs me £9 per BTC to mine, as this cashout paid for the hardware in one go.

BTC was all about secure transactions. The value was in the anonymity, security (relatively speaking; if you get hacked...) and of course, the impossibility of a chargeback....I

How can this be promoted when it is so wrong! There is no anonymity in Bitcoin. There is only a large cost/time delay in discovering who someone is, but every transaction is public. It is only a matter of time before node in the network start leaking user's names.

Much like people are like "Oh crap" about old drunken facebook posts, the breadth of information available int he future will embarrass those currently int he network.

User's names? You don't really know much about how a Bitcoin transaction works do you?

I really should stop procrastinating and finish my trade algorithm. Its hard to watch the market and work on my real job. Sigh oh well. I went 5x on my money last bubble. Guess I can handle not doubling my money this time. Though it would of been close to my yearly salary...damn yea looking at it that way i def need to stop procrastinating.

NPR's Planet Money did a great follow-up podcast recently on Bitcoin. While a bit light on the details for the Ars audience, I think they do a good job of summing up the problem. While the authors are trying to buy a physical product from an e-merchant pricing the item in bitcoins, they see the item's price fluctuate quite a bit over the course of an hour. A person who wants to use Bitcoins for buying goods or services will be disuaded from doing so given the instability of the currency. Because so many people are hoarding the currency, it is actually experiencing deflation.

I mostly agree with you... in fact, I'd go further and stop at "air" because for much of the world, obtaining potable water and collecting/catching food does require substantial work.

Still you should know that, dairy != beef and most corn is field corn followed by sweet corn, so the vast majority of corn farmers probably would be buying their popcorn and most dairy farmers would buy their beef! On the other hand, the cattle ranchers I know are very proud to eat their own beef and the gardeners despair when they have to resort to grocery tomatoes. (Did know someone who grew her own popcorn... once. Took a ridiculous amount of garden space for relatively little corn.)